Investors pulled $3.81 billion from U.S. high-yield bond funds in the past week, the biggest withdrawal since August 2014, according to Lipper.
The outflows jumped from $3.46 billion last week and came after Third Avenue Management’s decision to freeze redemptions in a credit fund triggered concerns of a bigger meltdown in debt markets. The average yield on junk bonds jumped to more than 9 percent on Dec. 14 for the first time since 2011, according to Bank of America Merrill Lynch indexes.
"The negative headline feeds upon itself," said Ricky Liu, a money manager at HSBC Global Asset Management. "And if you are in a poorly performing retail fund, there is also the concern that there could be more pain to follow. The commodities space is still a pretty big part of high yield and there is no relief there yet."
The latest slump in energy markets this week saw oil prices fall below $35 a barrel spurring an increase in risk perception in a high-yield gauge.
The risk premium on the Markit CDX North American High Yield Index, a credit-default swaps benchmark tied to the debt of 100 speculative-grade companies, rose 28 basis points to 508 basis points on Thursday. The gauge had surged to 523 basis points at the end of last week.
High-yield bonds have lost 2.9 percent this month, pushing their annual declines to 4.9 percent. The debt is poised to end a run of six straight years of gains, Bank of America Merrill Lynch index data show.